The European Elections: Political row erupts over OECD jobs study

A furious political debate erupted yesterday over the OECD Jobs Study, the Prime Minister claiming it pointed 'precisely to the sort of prescription that we have been applying here'.

Labour, by contrast, claimed the study confirmed the party's analysis of Britain's economic failure and its own prescription for reform.

The Conservatives seized particularly on the report's call for the role of statutory minimum wages - a key Labour policy - to be 'reassessed' while Labour highlighted paragraphs calling for a 'high skills, high-wage jobs strategy' and for a training levy, a Labour policy to which the Tories are opposed.

Michael Heseltine, President of the Board of Trade, hailed the report on 25 OECD countries as 'a remarkable endorsement of everything this Government has been doing in the 1980s and 1990s'.

Gordon Brown, Labour's shadow chancellor, by contrast, said: 'It is the high skills rather than low pay route that is the policy of today's American government and the policy of every government in Europe except the British government - and this is also the main theme of most of the 60 recommendations of the OECD report today.'

The report acknowledges that 'many new jobs are likely to be low-productivity, low-wage jobs', but says that 'OECD countries cannot cling to low-wage-labour products in the face of competition from low-wage countries'. It stresses that 'life- long learning must become a central element in a high- skills, high-wage jobs strategy'. It seeks big improvements in education and seeks 'to stimulate enterprises to undertake more skill development'.

But the report warns that statutory minimum wages 'often end up damaging employment opportunities for unskilled labour' and urges governments to consider indexation to prices rather than earnings to protect job prospects for the young.

Sir Norman Fowler, the Tory party chairman, said the report had 'blown a hole' in the opposition parties' election campaigns. But John Prescott, Labour's employment spokesman, said the report argued the minimum wage should be flexible. 'They don't want it to be rigid in its application. That's what we have said.'

Labour's precise general election promise for a pounds 3.40 an hour minimum wage at half median male earnings is back in the melting pot of its economic commission, but Mr Prescott insisted 'there is a role for a minimum wage policy'. Mr Brown added that 'every other country in Europe has a minimum wage'.

The United States had a minimum wage and Robert Reich, Secretary for Labor, had talked only on Monday of raising it, Mr Brown said. 'The OECD does not oppose the principle, it merely talks about the manner in which it is implemented, and there is no argument in academic research, much of which has been conducted since the OECD report which suggests that a minimum wage will cost jobs, sensibly implemented.'

Alan Beith, the Liberal Democrat Treasury spokesman, said the Government was predictably trying to use the report to defend policies that the report did not vindicate. While it showed continental Europe had a problem with costs and excessive regulation, that was not a justification for turning Britain into 'a deregulated, low-wage, low-skill, low-cost economy.'